Mystery gazette on G-Secs unravelled

The recently surfaced mystery gazette notification with regard to government securities (G-Secs) is part of an obsolete law, which the Central Bank has been attempting to comply with, and the law would be amended as soon as possible, the country’s economic managers said yesterday.

Central Bank Governor Dr. Indrajit Coomaraswamy said that gazetting G-Sec issuances at the start of a year would have been practical under the administrative basis with which the government had issued G-Secs from 1930s, when the Registered Stocks and Securities Ordinance No. 07 of 1937 was introduced, till 1997 when the auctions started.

“Once the operations in issuing the government securities gets a market dimension, it becomes impractical to give advanced notification on how much will be accepted and what the interest rate would be, because once the market forces are introduced into the system, there is more uncertainty and variability,” he said.

He said the governments had been able to follow the ordinance in the past since the governments were able to decide the amount, tenures and interest rates of G-Secs at the start of the year, depending on the country’s requirement for the year.

However, Dr. Coomaraswamy noted that despite the impracticality, the Central Bank has complied with the spirit of the ordinance by providing the public with as much information as possible about G-Secs.

“The Monetary Board has been publishing the details of the auctions on national newspapers and since the technology became available, on the website, so the Central Bank has substantially complied with the ordinance,” he said.

He added that the Central Bank each year has reserved a gazette number from the Government Printer and after issuing all debt for a year, published the details backdated to January 1, 2015, which meant that for that specific year, the then Finance Minister Mahinda Rajapaksa’s name would have appeared on the gazette.

Finance Minister Ravi Karunanayake said that the government was not attempting to divert any blame of the bond scandal to Rajapaksa but remained critical of Rajapaksa continuing to circumvent the ordinance instead of amending it. “When our government became aware of the situation, I immediately asked the Government Printer not to publish the gazette for 2016. These gazettes have not come either to the finance minister or the treasury secretary for approval,” he said.

He noted that the gazettes had been prepared by the officials in the Central Bank below the level of the Debt Department Superintendent and that it was also unusual that the gazette for 2015, which should have been sent for printing in December 2015, had been sent in November 2016. “Why has the hyperactive Auditor General not found this?” Karunanayake questioned.
Both Dr. Coomaraswamy and Karunanayake said that while the legality of the process would be determined later, all the G-Secs issued in the past are valid and that the investors should not be worried.

“All securities issued by the government of Sri Lanka are absolutely safe; they continue to be risk-free and the government of Sri Lanka is fully behind them. So no one should be concerned about the validity of government securities,” Dr. Coomaraswamy explained.

Karunanayake said that the ordinance would be amended as soon as possible and if the amendments cannot be completed by March 15, when the bonds would next be issued, an administrative solution would be taken and the details of the auction would be gazetted on the following day. (Chandeepa Wettasinghe)